THE INTERNATIONAL ENVIRONMENT Global economic prospects have been considerably dented by an economic downturn now extending to all advanced economies .

Will China find a way to reverse its economic slowdown?

The terrorist attacks in the United States increased uncertainty and prolonged the economic downturn .

The economic downturn in the euro area in 2001 also presented challenges for fiscal policy .

Furthermore , despite the economic slowdown , consumer confidence remained comparatively high .

The resilience of GDP growth to the global economic downturn can be explained by several factors .

Furthermore , despite the economic slowdown , consumer confidence remained comparatively high .

The economic downturn led to a strong deterioration in expectations regarding oil demand in 2009 .

ECB Annual Report 2009 INTEREST RATE CUTS AND EXTENSION OF ENHANCED CREDIT SUPPORT DURING THE ECONOMIC DOWNTURN Looking at monetary policy decisions in 2009 in more detail , information available at the beginning of that year confirmed a broad based global economic downturn at the turn of the year .

EMERGING ASIA In 2009 emerging Asia showed notable resilience to the global downturn . In the first quarter of 2009 the collapse of foreign trade led to negative real GDP growth rates in the

The budgetary outcome in 2004 reflected a slight fiscal loosening , while the impact of the economic cycle was minor .

However , the actual fiscal position benefits from a strong economy risks may arise if economic growth slows down .

In Japan , the fall in stock prices reflected the continued weakness in the domestic economy , which was exacerbated by the worldwide economic slowdown .

In 2001 , the Latin American countries were adversely hit by the global economic downturn , as well as by the worsening economic crisis in Argentina .

The outlook for a further improvement in budgetary balances had deteriorated in the early part of 1999 on account of a slowdown in economic growth . However , thereafter and especially in the second half of the year economic conditions improved

Against the background of the sound fundamentals of the euro area , the Governing Council remains confident that the slowdown in economic growth will be short lived .

China is in the throes of an identity crisis as it faces an almost inevitable economic slowdown and the need to implement a new growth model.

Inventories , which are another key variable explaining the dynamics of business non financial investment , played an important role in accentuating the economic downturn .

The impact of the latter on inflation is expected to be dampened , however , by declining growth in profit margins in view of the economic slowdown .

Determinants of international business cycle synchronisation An important feature of the slowdown in the world economy in 2001 was the high degree of synchronisation across the major economies .

In addition , compensation per employee was automatically affected by shorter working hours , a measure to which many firms resorted during the economic downturn .

Discretionary measures suffer from implementation lags and are difficult to reverse , and thus often lead to pro cyclical fiscal policies .

The ratio increased by nearly 0.5 percentage point , reflecting , inter alia , higher unemployment expenditure on account of the weak economic environment . Although some overspending was evident in specific categories such as healthcare , no generalised slippage from expenditure targets was discerned .

The global economy deteriorated significantly in 2001 The global economy experienced a marked slowdown throughout 2001 , following a record year of economic growth in 2000 .

At the same time , adverse lagged effects from the strong economic downturn , such as low capacity utilisation and increasing unemployment rates , continued to materialise .

The key monetary policy challenge was in relation to the sharp economic slowdown following the intensification of the global financial turmoil , and the associated consequences for the inflation outlook .

Notwithstanding a gradual slowdown during the summer of 2000 , available data continued to confirm risks of upward inflationary pressures in an Increasing price pressures ...

The standard deviation declined to around 1.7 percentage points from 2.5 percentage points in 2000 .

In the aftermath of the terrorist attacks of 11 September , it became increasingly clear that the economic slowdown in the euro area would be more protracted than previously expected .

In the aftermath of the attacks of 11 September , it became increasingly clear that the economic slowdown in the euro area would last longer and be more pronounced than previously expected .

However , in other cases , countries may be at a different stage of the economic cycle or have responded to a greater or lesser extent to the slowdown in the global environment in the period 1997 98 .

The deceleration was most pronounced in residential investment , marking the end of the expansionary phase of the business cycle in the construction sector in the context of a slowdown in house price growth .

Chart A US current account and net international investment position ( as a percentage of GDP ) Chart B Household borrowing ( as a percentage of consumption )

Despite the global economic slowdown , most countries have witnessed sustained rates of export growth over the past few years and , in many cases , have enlarged their market shares in the EU .

In particular, the government has managed the exchange rate to maintain manufacturers profitability, resulting in a sizable trade surplus (which has come down recently, but largely as a result of an economic slowdown).

China is not allowing its economic slowdown to derail its efforts to enlarge and modernize its navy and expand its commercial interests around Eurasia s southern rim.

Owing partly to the simultaneous economic slowdown in all the major economies of the world , stock prices declined across all sectors in the euro area between end 2000 and end 2001 .

This scenario is based on the expectation that the global economy will remain resilient , with the slowdown of economic growth in the United States partly offset by the sustained strength of emerging market economies .

2.4 OUTPUT , DEMAND AND LABOUR MARKET DEVELOPMENTS ECONOMIC GROWTH DEVELOPED FAVOURABLY IN 2007 Economic developments in 2007 were favourable overall , although growth slowed somewhat in the course of the year .

Assumptions with regard to the international environment The slowdown of economic growth in the United States as well as in a number of developed economies is expected to dampen global growth prospects , also reflecting the effects of the financial turmoil .

This rapid deterioration of the fiscal position is broad based among euro area countries and is due to the significant economic downturn , additional revenue shortfalls and the fiscal stimulus measures adopted by many governments .

On the one hand , both interest rates and house prices tend to decline during economic slowdowns , which prompts renewed demand for loans for house purchase on the part of some households .

Economic conditions in the euro area worsened as a result of the global economic slowdown which started to materialise at the end of 2000 .

This task was made harder by the global shock related to the terrorist attacks in the United States on 11 September , which increased uncertainty and aggravated the economic slowdown already taking place in the world economy and the euro area .

During the first quarter of 2009 oil prices were kept at low levels by the impact of the financial crisis and the subsequent economic downturn , which had a strong negative effect on demand prospects .